HDFC’s new fund offers entry into developed markets

Mumbai: Conservative mutual fund investors looking for global allocations could consider putting money in the HDFC Developed World Indexes Fund of Funds.

Since valuations in developed markets are at a premium to long-term averages, investors must spread their investments over a period of time, said financial advisors.

HDFC Developed World Indexes FoF will invest in Credit Suisse Index Funds, which will invest in five global products that bet on markets in Europe, Asia, the Pacific region, and the US among others.

The fund said it is different from the existing international offerings by rival funds because it has exposure to 23 developed countries. Most other international funds in India are country or region specific or thematic.

“Through this single scheme, an investor gets access to developed markets. Investors can consider this as a core portfolio holding,” said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.

In this fund, the US markets will have the highest exposure at 67%, followed by Europe at 19.1%, Japan at 6.6%, Canada at 3.3% and other developed markets excluding Japan, at 3.3%. Overall, the top 5 weights in the MSCI World Index are 22.5% in technology, 13.3% in financials and 12.8% in healthcare, 11.9% in consumer discretionary and 10.6% in industrials.

Financial planners said passive funds betting on developed markets might be better bets than actively-managed products, which have struggled to beat their benchmark indices. The scheme will have an expense ratio of 0.40% for the direct plan. The regular plan will have an expense ratio of 1%.

Investors should avoid putting lumpsum allocations in the fund at this juncture. “Valuations in developed markets are at a premium to long-term averages. Investors could stagger their investments over a period of time,” said Dhawan.

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